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US distribution utilities must rapidly transform to stay relevant

US utilities must act quickly to secure a long-term, essential role as market facilitator and platform provider in the distribution system of the future, concludes a new Ernst & Young LLP and GridWise Alliance report, In an accelerated energy transition, can US utilities fast-track transformation?

The coproduced study – which includes observations from executives of several of the largest US utilities – examines the changing state of the industry and explores the distribution system solutions needed for a digitized, decentralized and decarbonized electric grid.

Dana Hanson, Principal, Ernst & Young LLP and Americas Power and Utilities Leader, said, “The global energy transition is rapidly accelerating, and US distribution utilities do not have the luxury to wait and watch. They must prepare for a future that will see increased electrification of transport, heating and industry, as well as a growing number of customers empowered to produce and sell their own electricity. This requires utilities to invest in the right people, technologies and processes today, if they want to succeed in the new energy world tomorrow.”

Creating a fit-for-purpose distribution system
The report outlines that the US distribution utility of the future will need to manage a flexible resources platform – one that allows distributed energy resource (DER) owners and aggregators to participate and trade in a streamlined energy market in which power reliability is optimized across the entire system.

As DER technologies become more efficient, they are expected to experience tremendous growth, while at the same time decarbonization initiatives will drive the electrification of transportation, buildings, heating and industry. The existing grid is unable to respond to the challenges and opportunities this presents, creating pressure on utilities to embrace increased responsibilities that ensure power reliability and tap into new, sustainable, long-term revenue opportunities.

The report suggests distribution utilities are well positioned to take a leadership role, working with key stakeholders to transform the system into one that is flexible and agile enough to cope with the complexities of managing customer-centric loads and resources.

Steve Hauser, GridWise Alliance CEO, said, “Utilities have the opportunity to assume a significant leadership role in enabling the US electricity system transition. We’ve already seen many examples of progress toward this outcome. Key to this is collaboration between utilities and their peers, partners and regulators. Increased collaboration will allow for shared learnings, help achieve consensus on industry best practices and accelerate the changes needed.”

Distribution utilities must transform rapidly to keep up
While there is no one-size-fits-all solution, given differing state regulatory regimes and varying levels of digital grid maturity across the US, distribution utilities can take steps today to reinvent themselves and secure their future. The report outlines a three-phased approach to investment, which reflects local circumstances, maturity and dynamics. It also explores the skills and capabilities needed for US utilities to become linchpins in a distribution system that is fit-for-purpose in the evolved, digitized and clean energy world.

Hanson added, “Grid modernization investments to connect and protect the grid are critical to succeed in the energy transition. US utilities need to invest in new and enhanced capabilities across every aspect of their business and capture new revenue streams, while they simultaneously build and sustain trust with all key stakeholders, including regulators, customers, employees, industry peers and partners.”


This topic will be presented at DISTRIBUTECH in January. Learn more about the event here and register today.


Lead image photo credit: Daniel Allen Andrews (CC BY 4.0)